The economics of demand-led growth: theory and evidence for Brazil

Guimarães e Souza, Gustavo José
Oreiro, José Luis
Nabakashi, Luciano
Costa da Silva, Guilherme Jonas

2014-01-02T18:46:02Z

LC/G.2518-P

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Includes bibliography

This article describes the theory of demand-led growth and provides evidence that a demand-led growth regime exists in the Brazilian economy. Based on the methodology developed by Atesoglu (2002), econometric tests of this hypothesis show that almost 85% of the growth rate of real GDP in the period 1990-2005 is explained by demand-side variables, mainly exports and government consumption. As the current fiscal crisis rules out fiscal expansion, Brazil's only option is to adopt an export-led growth model. The article also shows that the maintenance of undervalued real exchange rate is a major determinant of export growth in developing countries such as Brazil.

ECONOMIC GROWTH; ECONOMETRIC MODELS; MACROECONOMICS; EXPORTS; FOREIGN EXCHANGE RATES; SUPPLY AND DEMAND; DEVELOPMENT MODELS; MODELOS ECONOMETRICOS; MACROECONOMIA; EXPORTACIONES; TIPOS DE CAMBIO; MODELOS DE DESARROLLO; OFERTA Y DEMANDA; CRECIMIENTO ECONOMICO;